BFSI challenges in 2024

BFSI  CHALLENGES IN CYBERSECURITY THE MOST KEY AREA IN 2024 TO BE ADDRESSED

INTRODUCTION

The banking, financial, and insurance services industry (BFSI) is one industry that cannot stop no matter what! In the ever-evolving landscape of the global economy, the BFSI play a key role. As we entered into 2024, it becomes increasingly essential to understand the dynamics of this multifaceted sector. This article aims to provide an overview of the BFSI industry, explore the types of services it encompasses, recent trends and developments, the challenges and opportunities, and Future outlook of the BFSI industry. Major macroeconomic factors depend on it, and many other industries function because of the BFSI sector. It is extremely crucial for banks and insurance companies to reimagine, rethink, and evolve the way they function. The past few years have seen the rise of remote working and disrupted industries across. But, the  BFSI sector has taken a massive hit because of the pandemic. Moreover, customer expectations keep rising, and new technologies and heavy regulations are the tips of the iceberg for banks and insurance companies to keep up with, and that is why the no-code for BFSI industry is paving the path toward a major transformation.

The BFSI sector blends three key areas: Banking, Financial Services, and Insurance. Each sector has a distinct yet linked role in fostering global economic activities.

·        Banking oversees financial transactions, lending, and deposits.

·        Financial services cover diverse activities like asset management, wealth management, and financial planning.

·        Insurance manages risk through services like life insurance, general insurance, and reinsurance.

Key Components of the BFSI Sector

The BFSI sector encompasses 3 industries: banking, financial services, and insurance. Here’s some more information about the BFSI sector in 2024:

Banking

The banking sector is the backbone of the BFSI industry. It includes various types of services catering to both individuals and businesses. Retail banking focuses on everyday financial transactions for individuals, while corporate banking serves the financial needs of businesses. Investment banking, another integral part, facilitates capital raising and investment activities.

Financial Services

Financial services extend beyond traditional banking activities. Asset management involves the professional management of various securities and assets to meet specific investment goals. Wealth management targets high-net-worth individuals, providing comprehensive financial planning and investment advice.

Insurance

Insurance shields against diverse risks. Life insurance aids beneficiaries financially if the policyholder passes away. General insurance spans risks from property damage to liability. Reinsurance sees insurers sharing risks to manage exposure.

OPERATING MODELS.

From simple processes like e-banking, transactions, and bank statements to cybersecurity, online payment solutions, and authentication, banks must digitally transform their entire systems and integrate seamlessly. Customer experience in the BFSI industry is a top priority. To become an agile, streamlined, and collaborative organization, the sector must offer clients and customers exceptional experiences across your business network and secure both- a functional and competitive edge.

THE DIGITAL CHALLENGE FOR BFSI

The BFSI sector faces challenges every minute- from customer service to security.  The top 5 challenges banks and insurance companies face and how it affects their digital transformation. We believe change needs to start from the deep-rooted systems of an organization, and these deep roots are simple, basic processes on which entire organizations rely. With traditional processes and systems, tasks like forms, keeping track of transactions, or accounting processes are major hassles to execute to perfection. Moreover, managing the continuous inflow and outflow of data makes it almost impossible to keep track of, and the question of security arises too. The bottlenecks and pain points of the BFSI sector for starters, are

1. Manual Processes

BFSI is such an industry where mistrust leads to manual processes, but the risk of errors still does not go down. Banks and insurance companies still rely on using traditional manual paperwork, which impacts business operations majorly. Especially the amount of time taken, scale as well as the accuracy of data, and costs as well.

2. Paper-based Forms and Documents

It just does not stop at manual processes! The use of paper in the industry is massive- from registration forms to claims to bank forms, and cheques- the list does not end! This invites a massive pest fest- yes, we call it a pest fest because of the decay in processes paper forms cause. Getting them misplaced, filing them, and, well, the coffee stains won’t go by themselves!

3. Security

Security appears to be a matter of common sense, but many companies face major challenges when securing networks and programming within the organization. Traditional systems become outdated, and so does cybersecurity. Any breaches in the system and among the team could easily invite weaknesses in the banking and insurance system’s security.

4.nbsp;Regulations

The BFSI sector constantly needs to be updated with regulatory compliance practices and follow them as per guidelines. Procedures and tasks must be managed, overseen, and approved by different departments and executives. For insurers, a truly end-to-end insurance quote, binding, and managing policy administration with paper forms or legacy systems can become extremely tedious. Bank regulations with spreadsheets and administration are simply inviting the devil of chaos.  Compliance and regulatory bodies can significantly strain resources and often rely on the ability to correlate and collate data from disparate sources.

5. Customer Experience

A major and extremely crucial challenge faced by the BFSI Sector is delivering a truly customer-centric, all-encompassing consumer experience. Today’s customer is smarter, tech-savvy, and more consciously aware and informed than ever before. They expect constant communication, are very much involved in every step of the process, and demand personalization and convenience from their banking and insurance experience. With the internal challenges the BFSI sector faces, it mostly gets extremely haphazard for companies to deliver an omnichannel experience that is also attuned to technology. Outdated technology is the biggest factor of customer frustration, causing them not to retain and be loyal. With so many BFSI industry challenges to contend with and comprehend, paving a clear and truly experiential path forward does seem extremely overwhelming. But, we have something for you that’ll ‘insure’ your way towards digital transformation. No code for BFSI can accomplish and transform the industry in 2024.

Investing in and for the future with No-code for BFSI

We cannot stress how important it is for companies in BFSI to be more flexible, deliver faster and in control, and drive a seamless customer experience. And the steppingstone and key investment any and every bank, insurance, and financial services company must make in digitizing their processes and enabling the essential step to digital transformation. The steppingstone and key investment any and every bank, insurance, and financial services company must do is in digitizing their processes and enable the most essential step to digital transformation. Truly end-to-end digitization will not only help enable and eliminate operational hassles, and IT hassles but also drive frictionless growth. From onboarding to growth-propelling loan origination, from payments to cross-selling. And all of this is possible with just three words and endless possibilities- No-code Applications.

What is No-Code?

Simply put, No-code process automation automates processes without prior knowledge of code. It is essentially automating processes using no-code apps. It makes process automation and workflow automation a breeze. No-code applications are the first foundational steps to providing a seamless workplace operation and digital experience. No-code, shortened from no-code platforms, refers to application development platforms that automate processes requiring zero coding! This means applications can be built on purely visual, intuitive interfaces with no need for programming experience. These platforms often offer features that are simple such as drag-and-drop form builders. They work the same way you get to design a collage with stickers, simply take what you need and put it where you need it most. It eliminates the need for any coding. These apps help rethink, repurpose, and innovate routine functions and manual processes. This demand is exploiting the pain points of organizations because, as much as they would like to transform digitally, they cannot afford and/or find stellar tech professionals who can take over all the IT requirements. But no-code application development says you don’t need an IT background and coding knowledge! All you need to do to overcome the digital challenge is to let your staff members build apps and transform them as per their requirements (citizen developers) without prior tech knowledge or the need for training. With no code for BFSI, banks, and insurance companies can not only customize as per their needs but also gain the freedom to innovate at speed. No-code apps take care of all the underlying complexities, such as database, UX, security, and integration, and build and deliver breakthrough solutions up to 10X faster.

This is why no-code development for banking is a boon, and the market is growing rapidly. The global low-code platform market is forecasted to generate a revenue of $187.0 billion by 2030. Banking and insurance organizations have to follow the market, and the market is increasingly leaning towards convenience, accessibility, functionality, and smooth processes through digitization. The global low-code platform market is forecasted to generate a revenue of $187.0 billion by 2030.No code for BFSI industry ensures that they can respond promptly to organizational and customer demands.  No-code for BFSI companies is perfect because they offer all the essential infrastructure and technical capabilities to create a range of apps- from onboarding to tracking transactions and security. To start with some

Finance Management

You can easily eliminate inefficient Excel-based budget spreadsheets and automate and optimize transactions and approvals. Enable deposit and withdrawal process automation with easy-to-use apps.

Investment amp; Loan Management

Automating and streamlining loan requests and investment accounts is going to save you time, big time! You can ensure speedy approvals through automated workflows as per company processes and policies. And guess what? Analyze investment policies and track cash flows over any period using advanced reports and dashboards apps draw focus on user experience, and you’ll immediately see faster processing and updated data on the portal. Eliminate manual processing and unnecessary bank visits through online forms and approvals.

Policy Issuance

For a proper policy insurance system, you can develop and build simple, easy-to-use no-code apps for glitchy policy admin. Save that paper and go paperless with forms automation and automated billing systems for hassle-free policy generation and set up accounts easily.

Customer On-Boarding

No-code solutions can help financial lenders with the shortening time span of customer onboarding and off-boarding journey. With the automation of these processes and custom applications, the time rather spent on lengthy KYC procedures can be significantly reduced; that too with easy data updates and elimination of errors.

Meeting Evolving Regulatory Requirements

No-code citizen development can help in rapid change management of regulatory requirements in a short span. Quick application development and easy updates make way for any new change in the process and steer clear of possible hindrances.

BFSI adapts to evolving customer needs and the global economy. Recent trends encompass:

Digital Transformation

Adoption of Fintech

The BFSI industry is experiencing a significant shift with the widespread adoption of financial technology (fintech). Fintech companies leverage technology to provide innovative solutions, from digital payment platforms to robo-advisors and peer-to-peer lending.

Mobile Banking and Payments

Mobile banking is now a key player, providing customers the ease of managing their money while on the move. Thanks to secure and efficient tech, mobile payment options are transforming the way transactions happen.

Blockchain Technology

Blockchain technology is revolutionising the BFSI sector by enhancing transparency, security, and efficiency in financial transactions. It is widely used in areas such as cross-border payments, smart contracts, and digital identity verification.

Regulatory Changes

Compliance and Risk Management

Stringent regulatory requirements continue to shape the BFSI industry, with a focus on improving compliance and risk management practices. Institutions are investing in robust systems to ensure adherence to evolving regulatory frameworks.

Impact of New Policies on BFSI

The industry is navigating the impact of new policies aimed at fostering financial stability and consumer protection. Changes in data privacy regulations, anti-money laundering measures, and cybersecurity standards are reshaping the operational landscape.

Artificial Intelligence and Machine Learning

Automation in Banking Processes

Artificial Intelligence (AI) and Machine Learning (ML) are being harnessed to automate routine banking processes, reducing operational costs and improving efficiency. Chatbots, automated customer service, and fraud detection systems are examples of AI applications.

Personalized Financial Services

AI is enabling BFSI providers to offer personalised financial services. Through data analysis and predictive modelling, institutions can tailor their offerings to individual customer needs, enhancing the overall customer experience.

Cybersecurity in BFSI

Growing Threat Landscape

As the BFSI industry embraces digital transformation, the threat landscape for cyberattacks continues to expand. Cybersecurity is a top priority, with institutions investing in advanced technologies and strategies to safeguard sensitive financial data.

Strategies for Securing Financial Data

In response to cybersecurity challenges, BFSI entities are implementing robust strategies, including multi-factor authentication, encryption, and continuous monitoring. Collaboration with cybersecurity experts and the development of resilient security frameworks are crucial components of these strategies.

Sustainable Finance

ESG (Environmental, Social, and Governance) Investing

Sustainable finance is gaining traction, with a growing emphasis on Environmental, Social, and Governance (ESG) criteria. Investors and financial institutions are integrating ESG considerations into their decision-making processes to promote responsible and ethical investments.

Green Banking Initiatives

Green banking initiatives focus on environmentally friendly practices, from paperless transactions to financing projects that promote sustainability. Financial institutions are increasingly aligning their operations with green principles to address climate change concerns.

Risks and Challenges in BFSI

The Banking, Financial Services, and Insurance (BFSI) industry, while undergoing significant transformations, is not immune to a myriad of risks and challenges. Navigating these complexities requires a strategic approach and a proactive stance to ensure the stability and resilience of institutions. In this section, we delve deeper into the key risks and challenges facing the BFSI sector in 2024.

Cybersecurity Threats

1.     Heightened Cybersecurity Risks: With the increasing reliance on digital technologies, the BFSI sector remains a prime target for cyber threats. The sophistication and frequency of cyberattacks continue to escalate, ranging from ransomware attacks to data breaches. Financial institutions must continually invest in advanced cybersecurity measures, including robust encryption, multi-factor authentication, and real-time threat detection systems, to safeguard sensitive customer data and maintain trust.

2.     Insider Threats: As digital systems become more sophisticated, the risk of insider threats also grows. Employees or third-party partners with access to critical systems pose a potential risk. Institutions need to implement stringent access controls, conduct regular employee training on cybersecurity best practices, and monitor user activities to detect and mitigate insider threats.

Economic Downturns and Financial Stability

1.     economic Navigating Economic Uncertainties: The BFSI industry is inherently tied to conditions. Economic downturns, whether caused by global crises or regional factors, can significantly impact the financial stability of institutions. Institutions must implement robust risk management practices, stress testing, and scenario analysis to anticipate and mitigate the impact of economic uncertainties. Diversifying portfolios and maintaining liquidity buffers are essential strategies to enhance resilience in the face of economic challenges.

2.     Non-Performing Assets (NPAs): Economic downturns can lead to an increase in non-performing assets, affecting the asset quality of banks. Prudent credit risk management, regular assessments of loan portfolios, and the implementation of early warning systems are crucial to identifying and addressing potential NPAs before they escalate.

Adapting to Technological Changes

1.     Legacy Systems and Technological Obsolescence: The BFSI sector often grapples with legacy systems that hinder the seamless integration of new technologies. These outdated systems not only impede innovation but also pose security risks. Institutions must invest in modernising their infrastructure, adopting agile development practices, and ensuring interoperability between legacy systems and new technologies to stay competitive and resilient in a rapidly evolving technological landscape.

2.     Regulatory Compliance in a Rapidly Changing Environment: Keeping up with evolving regulatory requirements is a persistent challenge. The pace of technological change often outstrips the ability of regulators to create and update frameworks. BFSI institutions must adopt agile regulatory compliance strategies, leveraging technology for real-time monitoring and reporting. Collaborating with regulators to provide feedback on the practical implications of regulations can contribute to more effective and adaptive regulatory frameworks.

3.     Operational Resilience: The increasing reliance on technology makes operational resilience a critical concern. System outages, cyberattacks, or other disruptions can have far-reaching consequences. Implementing robust business continuity plans, redundancy measures, and regular testing of disaster recovery procedures are imperative to ensure operational resilience and minimise the impact of disruptions.

Opportunities for Growth in BFSI Industry

However, within challenges lie opportunities for growth, innovation, and the creation of a more resilient and responsive financial ecosystem.

Innovation in Risk Management

1.     Advanced Analytics for Risk Assessment: The integration of advanced analytics, including machine learning and predictive modelling, can enhance risk assessment capabilities. Institutions can leverage big data to identify emerging risks, predict potential vulnerabilities, and make data-driven decisions to proactively manage risks.

2.     RegTech Solutions: Regulatory Technology (RegTech) offers innovative solutions to streamline and automate regulatory compliance. Implementing RegTech solutions can not only improve efficiency but also enhance accuracy in meeting compliance requirements, reducing the burden of manual processes.

Environmental, Social, and Governance (ESG) Considerations

1.     ESG Risk Assessment: As sustainability becomes a focal point, incorporating ESG factors into risk assessments is essential. Institutions need to evaluate the environmental and social risks associated with their investments and lending practices. Integrating ESG considerations into risk models can provide a more comprehensive view of potential risks and opportunities.

2.     Climate-Related Risks: Climate change poses a unique set of risks to the BFSI sector, including physical risks (e.g., natural disasters) and transition risks (e.g., policy changes affecting carbon-intensive industries). Institutions must conduct thorough climate risk assessments and develop strategies to mitigate the impact of climate-related risks on their portfolios.

BFSI Industry in 2024- Future Outlook

Anticipated changes, fueled by emerging technologies and influenced by global economic factors, will shape the industry’s future landscape. Adapting to these changes will be paramount for stakeholders seeking sustained success in the dynamic world of BFSI.

Anticipated Changes and Evolutions

Looking ahead, the BFSI industry is expected to witness further advancements in technology, regulatory frameworks, and customer expectations. Collaboration between traditional financial institutions and fintech disruptors is likely to increase, fostering innovation and improved services.

Potential Impact of Emerging Technologies

Emerging technologies such as quantum computing, decentralised finance (DeFi), and advanced analytics have the potential to reshape the BFSI landscape. These technologies could enhance security, efficiency, and the overall customer experience, setting the stage for a new era in financial services.

Global Economic Factors Affecting the BFSI Sector

The BFSI industry is intrinsically linked to global economic conditions. Factors such as interest rates, inflation, and geopolitical events can influence the industry’s performance. Institutions must remain vigilant and adaptable to navigate potential economic challenges.

CONCLUSION

The financial sector is the backbone of the global economy. As such, the growing focus of financial firms on operational resilience – the ability to foresee, prevent, withstand, respond to, and recover from risk events – isn’t surprising. Most recently, the COVID-19 pandemic served as a real-world test of the resilience of banking and financial institutions. The agility demonstrated by the organizations to quickly move their operations completely online and support remote working environments while ensuring security and compliance has been remarkable. That said, to thrive in today’s rapidly evolving risk landscape – marked with high-frequency, high-impact risk events, growing interconnectedness of risks, and amplified digital dependencies, organizations need to double down on their efforts to strengthen operational resilience. It is critical for banks to not only have robust business continuity and disaster recovery programs in place but also integrate them into the overarching enterprise risk management program. This is important to get a holistic, 360-degree view of the organization’s GRC posture, understand the critical business functions and their interrelationships with other business functions, and improve risk visibility, foresight, and preparedness required for being resilient.